MALAYSIA is among global leaders in sustainability reporting with 99% of the top 100 companies in the country publishing sustainability reports, according to KPMG International’s Survey of Sustainability Reporting 2020.
More broadly, 80% of the world’s 250 largest companies now report on sustainability, while sustainability reporting in Asia Pacific has grown by 6 percentage points since 2017 to 84%.
The survey reviewed corporate reporting from 5,200 companies ─ the top 100 companies by revenue in 52 different countries and jurisdictions, including Malaysia. It provides a detailed look at global trends in sustainability reporting and offers insights for business leaders, company boards and sustainability professionals.
Malaysia is ranked second in the region behind Japan (100%) and ahead of India (98%), Taiwan (93%) and Australia (92%). The survey also found that 97% of top 100 companies in Malaysia include sustainability information in their annual reports.
“While Malaysia’s high inclusion rate of sustainability data in annual reporting is driven by Bursa Malaysia, we see this active participation from Malaysian top companies to be an encouraging sign, which sets the tone and example for other jurisdictions to follow,” said KPMG Malaysia’s head of governance and sustainability .
“In fact, we’ve observed a growing understanding among Malaysian boards and companies on the importance of operating in a responsible manner and the impact of environmental, social and governance (ESG) issues on society and economic sustainability which directly correlates to long-term financial performance and corporate value.”
In addition, this survey also serves as a guide to investors, asset managers and ratings agencies who now factor sustainability or ESG information into their assessment of corporate performance and risk.
Kasturi pointed out that a majority of companies – based on a study of disclosures among the Top 200 companies in Malaysia – have recognised governance and social risks as material risks.
This is likely down to the fact that these matters are increasingly recognised as components of business resiliency, impacting company operations and business continuity.
The survey also found that more than two-thirds (69%) of reporting companies now connect their business activities with the United Nation’s Sustainable development Goals (SDGs) in their corporate reporting.
However, only 14% disclose how they contribute to the global problems the SDGs seek to solve.
Furthermore, SDG reporting is found to be mostly unbalanced and often disconnected from business goals.
The SDGs most often prioritised by businesses worldwide are SDG 8 (Decent Work and Economic Growth), SDG 13 (Climate Action), and SDG 12 (Responsible Consumption & Production).
Meanwhile, issues such as climate change should be recognised at a more strategic level as its impact on supply chain/ product innovation and responsibility would eventually impact the sustainability of the business given the current development and business environment.
On the global front, about 40% companies globally acknowledge the risk of climate change in their financial reporting, an increase from 28% in 2017.
Despite repeated warnings about destruction of ecosystems and potentially dire consequences for people and the economy, only 23% of companies worldwide (at risk from the loss of biodiversity) are currently disclosing biodiversity risk in their corporate reporting.
This could be explained by the fact that many companies currently lack a sophisticated understanding of how biodiversity-related risk could affect their business. Additionally, these companies lack access to tools and methodologies to help them model and disclose the risk impacts.
The first step to address this lack is for companies to analyse to what extent their supply chains are highly dependent on nature and ecosystem services, advised Kasturi.
This survey makes it increasingly apparent that risk is the new lens through which to consider sustainability or ESG as business leaders are pressured to secure long-term growth and concurrently manage the economic effects of the COVID-19 pandemic.
“That said, the state and depth of sustainability reporting is encouraging, and it shows that companies have shifted from purely profit objectives to also consider their purpose in society,” added Kasturi. – Dec 15, 2020
